Private life insurance companies make a comeback

February 22, 2015: After ceding market share to LIC in the life insurance business for the past four years, private insurers have made a comeback in 2014-15.

Private life insurers saw their combined new premium inflows rise 17 per cent in the first nine months of this fiscal, while LIC’s inflows declined 21 per cent, according to IRDA data.

The market share of private life insurers rocketed to 30 per cent by December 2014, up from 22.3 per cent a year ago. ICICI Prudential Life, HDFC Standard Life and SBI Life have gained the most. LIC saw its market share drop from 78 per cent to 70 per cent.

ULIPs comeback

But why did insurance buyers suddenly make a beeline for private players? One reason seems to be their renewed preference for unit-linked insurance plans (ULIPs), given the upbeat equity market. HDFC Life saw its ULIP premium collections jump 33 per cent in the first nine months of the year. ULIPs made up 60 per cent of the company’s new business this year. It was less than half last year.

Similarly, SBI Life also has seen ULIPs garner 45 per cent of its new business compared with 35 per cent last year. Even as its traditional policies barely grew, ULIP collections went up by 11 per cent. For ICICI Prudential Life, the largest private sector life insurer, 80 per cent of the business comes from ULIPs. Observers explain LIC’s loss in market share in terms of its insignificant presence in ULIPs.

LIC has a few older market-linked plans in its stables, but none of them is currently open to new investors. Private insurers have also fared well because they rely more on corporate and bank tie-ups to distribute their products, instead of individual agents. For ICICI Prudential Life, the premium from the banking channel increased 50 per cent in the first nine months of the fiscal. SBI Life saw about 45-50 per cent of its premium come from its corporate or bank agents.

Arijit Basu, Managing Director, SBI Life, said, “We saw an increase in income from the bancassurance channel because we were able to have more SBI staffers selling insurance. We also introduced a simple term plan with return of premium feature for these staff to sell.”

In 2013-14, LIC had procured about 95.99 per cent of its total business from individual agents. Private insurers had only 40 per cent of their business coming from individual agents.

The popularity of online term plans with younger people is also working in favour of private players. Most private players today have at least one product in their portfolio that is sold exclusively online.

Online presence

ICICI Prudential Life has seen premiums flowing in through its online channel rise by 88 per cent in April-December 2014 compared with previous year.

Subrat Mohanty, Executive Vice-President — Strategy, Customer Relations, Persistency and Technology of HDFC Life, said the company’s online business grew 80 per cent in the nine months. LIC also has a term policy that is available online. But the plan has been only recently introduced and is more expensive than the online plans of private life insurers.